Make customer segmentation work

Reaching potential buyers with a targeted message at the right time is key for maintaining sales growth. By examining your existing customers and segmenting them into groups, you can identify who spends what, when. Here we explain how to implement a customer segmentation model

Segmentation can help you design new products, services and marketing campaigns to get customers to buy more from you.

"Segmentation is important for any business," says Lucy Whittington, director at Inspired Business Marketing. "It should help the money you spend, get a better return, because you are not using a one-size-fits-all approach."

Research customer segmentation

Start by researching your customers. If you have a customer management system, look at past purchases to identify trends. If this data isn’t available, carry out face-to-face or telephone research to establish why customers buy from you. You can also use published market reports and statistics covering general markets to build a picture of your customers.

You then need to use this data to split your customers into groups according to factors such as spending patterns, age, sex and location. Using this information, you can work out who you most want to target.

"This usually translates to the most profitable customers," says Whittington. "Although take care to look at the lifetime value of a customer rather than a one-off purchase."

Target your marketing to key customer segments

You can then target your marketing spend to where your most profitable customers are most likely to see those messages, and develop new products (or repackage existing ones) to suit different segments. For example, a personal trainer has one core service, but segmentation might identify several audiences, for example new mums, professional athletes and body builders.

"By changing the look of their adverts and where they advertise, businesses can position themselves as an expert rather than a general practitioner and are likely to get more customers as a result," explains Whittington.

This doesn’t necessarily mean spending lots on advertising campaigns. "If you have a good database, then email is a cheap and easy way to send targeted messages," continues Whittington. "Another way is using your website. If you currently promote the business as offering one product or service, split your home page into different sections. If you are targeting business buyers this might be by HR, finance and marketing. If you are targeting consumers, then have different pages for different price ranges, for example."

Tailor messages to each customer segment

It's also vital to give a consistent message across all your marketing material. Don’t send out a well-targeted direct mail campaign if potential customers can’t see themselves reflected on your website. "People like to see products and services that are suitable for them and that are clearly signposted as such," advises Whittington.

Be aware, though, that businesses claiming to be jack-of-all-trades risk appearing as master of none. "Start with the segment you believe will be most profitable, and add marketing messages aimed at other segments as you build sales," concludes Whittington. "Get all of this right and the potential benefits are huge."